Big Banks Embracing Blockchain
Big Banks Embracing Blockchain, image Credit (Nikkei Asian Review)

Bitcoin is among the most divisive phenomena of the 21st century. It has as many enthusiasts and proponents as it has opponents, it has been called both the savior of the global financial system and its downfall. This duality is due to some of its features that make it very different from what we’re used to, covered extensively in every review and all Bitcoin FAQs you will find online: it’s instant, anonymous, and beyond the control of the authorities. The latter is the trait that made Bitcoin and the rest of the “coins” that emerged in its wake to be such a hated and feared new concept. The technology behind it, in turn, is another matter. The blockchain is what makes Bitcoin and the rest of the cryptocurrencies “work” – and its merits are recognized by even the most fierce opponents of Bitcoin.

Several major international financial institutions have embraced blockchain and adapted it to their own use.

JP Morgan

American multinational investment bank JP Morgan announced its own digital coin in February, becoming the first institution of its kind to do so. Its JPM Coin is a blockchain-based technology that will allow the bank to transfer payments between institutional clients. The JPM Coin is not a standalone currency, like Bitcoin, but rather a digital representation of a certain sum in US dollars – it qualifies as a “Stablecoin“. When one of the bank’s clients send JPM Coins across the company’s network, this represents a dollar amount that can be claimed by the recipient.

Why adopt this type of technology, you might ask? Well, the main reason for this is speed: when JPM Coins are transferred, the transaction is almost instantaneous. This reduces the settlement times significantly, cutting out the middlemen – this way, the clients of the bank can enjoy a cheaper and most importantly faster service.

JP Morgan tested the technology with a small number of institutional – B2B – clients this year. If all goes well, the pilot program will be extended to cover more – perhaps all – of these clients in the future.

Wells Fargo

Wells Fargo is another major American investment bank that has decided to adopt a blockchain-based solution. Announced this September, the Wells Fargo Digital Cash will be similar to the one introduced by JPM earlier this year but with one major difference: instead of aiming it at institutional clients, Wells Fargo will use the WFDC for internal settlements between its international locations.

Aside from increasing the speed of internal settlements to the “near-real-time”, the use of Wells Fargo Digital Cash will also reduce the costs of cross-border money transfers by cutting out the middlemen. Besides, it will allow the transfers to be handled outside the normal operating hours, thus further reducing the waiting times across its offices around the world.

Bitcoin might become the currency of the future – then again, it might prove to be the passing fad some consider it to be. The technology behind it – Blockchain – has, in turn, proven its viability in many areas and will help shape our future in the years to come.

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Teodora Torrendo is an investigative journalist and is a correspondent for European Union. She is based in Zurich in Switzerland and her field of work include covering human rights violations which take place in the various countries in and outside Europe. She also reports about the political situation in European Union. She has worked with some reputed companies in Europe and is currently contributing to USA News as a freelance journalist. As someone who has a Masters’ degree in Human Rights she also delivers lectures on Intercultural Management to students of Human Rights. She is also an authority on the Arab world politics and their diversity.